Tomorrow (February 26) the House will vote on HR 1106, a housing package that includes the judicial modification provision of HR 200. That provision would let homeowners turn to the bankruptcy courts to allow them to modify the mortgages securing their principal residence. Currently, bankruptcy provides no remedy for homeowners who are trying to save their home from foreclosure.
While there are a number of complicated issues affecting our economy, the housing crisis continues to devolve. The Washington Times reports that there is no relief in sight from foreclosures and the falling home values that help fueling it. We can encourage Congress to do nothing, while the economy continues a downward spiral. Or we can tell them to pass this bill and give homeowners the chance they deserve in bankruptcy.
House approval is not guaranteed. The American Banks Association and the Financial Services Roundtable have sent letters to house leaders urging that the bankruptcy modification provisions be removed from the “Helping Families Save Their Homes Act of 2009.” The “buzz” I am hearing is that the lender lobbyists are showing up in “packs” in Member offices urging opposition to the judicial loan modification proposals. “Packs.” What the hell are they so scared of that they have to travel in packs? According to a report from CNN, two-thirds of mortgage servicers have agreed to the foreclosure mitigation plan outlined by the Secretary of the Treasury.
[T]he prospect of a law amending the bankruptcy code to allow judges to dictate new terms on mortgages in the event of an individual filing bankruptcy, was also likely a significant factor in the companies’ willingness to cooperate with the administration’s plans.
The House is working on legislation which would be aimed at helping people in bankruptcy to hang on to their primary residences. It could see bankruptcy judges compelling mortgage-servicing companies to accept new terms on an individual’s mortgage.
Other than Citigroup, other large banks remain opposed to the bankruptcy-law change, arguing that it would lead to borrowers to seek bankruptcy at the first sign of trouble, rather than consider other options that might be more costly.
I don’t buy that – mainly because when I meet with clients, they are the first to tell me that filing bankruptcy is the last thing they wanted to do. So to the lenders and their servicers, I say this: if the remaining one-third of you do not want bankruptcy judges modifying their loans, modify the loans so that the homeowner doesn’t have to file bankruptcy. And for those two-thirds who have expressed a willingness to modify the loans, do it. Let’s cut the crap and just do it.
Will it increase bankruptcy filings? The Congressional Budget Office says yes. But they also say that more than 1 million homeowners facing foreclosure could benefit from this legislation. I view that as 1 million less people who will lose their home if this bill fails. These people are our neighbors, our friends and our colleagues.
So what can you do? Contact your member of Congress by phone or fax.
Email your friends and family. Ask them to contact their congressional representative by phone or fax.
What do you tell them? Try something like this:
We cannot end the financial crisis without stemming the rising tide of foreclosures. Court-supervised loan modification is an essential component of an effective and comprehensive plan to meet that challenge. And unlike every other solution being considered in Washington, it comes at no cost to U.S. taxpayers.
If we are successful tomorrow, we move over to the Senate. If we are not, that is it. No second chance. So please don’t wait. Support HR 1106.
And if you do not support it, I’ll remember. I’ll remember it when my friend loses her home because she lost her job. I’ll remember it when my house value plummets because the home next door is vacant and abandoned because the previous owner could not afford the payments. I’ll remember it on election day.
Ok, so maybe that last bit is a little over the top, but you get my point. It really is now or never. And Congress really needs to know this now.
For more thoughts, check out Real Clear Politics: Let Bankruptcy Courts Change Mortgages
Previous posts on the subject:
The President’s “Plan”
Mortgage Modification Legislation Update: Citigroup Supports the Bill
Keep the Bankruptcy Option On the Table
Changing Chapter 13: Some Facts on the Pandora’s Box
Mortgage Modification Update: Not So Hopeful
For Everything, There is a Time
One of the most common client complaints I have heard throughout my career is how long the legal process can take. I can appreciate that. At the same time, what’s worth doing right, is worth doing well. Sometimes, it takes time to do something well. And lately, time is something that has been a luxury with some of the clients I see. Today, I was reminded how important time can be.
I received a call from some homeowners. They are in one of my least favorite mortgage products: 2/28, interest only. Translated: the first two years of their mortgage payments are “interest only.” Then, in 2 months, the principal will be added to their already high interest-only mortgage payment.
Fortunately, they are not behind. Yet. But they will be if time continues to march forward without some intervention. And even more fortunately, they are calling me early enough that we can take our time and explore all reasonable options available. There is no rushing to the Bankruptcy Court to stop an auction. We can take our time, explore the options, and move in the best direction for them.
Not everyone has that option, but the fact is, the only reason why they do not have the option is because they do not, or cannot look at the handwriting on the wall. Privately, colleagues have expressed their view that I tend to have a negative view of the economy. At the risk of continuing to sound like a ‘Negative Nancy’, today the stock market decided to deal with the summer heat by slipping into the deep end of the pool. Is the end nigh? No. But one cannot ignore that come October $50 billion worth of mortgages will be adjusted to reflect higher interest rates. For real. The handing writing is on the wall for more than the folks who were brave enough to pick up the phone today.
If you see the handwriting on the wall – and perhaps most importantly, if you can muster up the strength to look at what might not be so pleasant to look at on that yonder wall, call someone. Call someone now. It’s only July. There’s two full calendar months before October to plan, prioritize and strategize. That is time. And time is a precious commodity when it comes to saving your home.
October is a time for pumpkins, leaf raking and the World Series. If you are looking to October with a sense of dread, it’s time to do something about it. You can. There is time.
Tags: Bankruptcy, Chapter 13, Commentary - Legal, debt, debt relief, Economy, foreclosure, mortgage, Mortgage and Foreclosure, Mortgages and Foreclosures
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